In early 2002, Honeywell was a mess. Not just a "rough quarter" kind of mess, but a full-blown corporate disaster. The merger with AlliedSignal had turned into a cultural civil war. A failed buyout attempt by GE had left employees demoralized and waiting for a savior who never showed up. When David M Cote Honeywell's new CEO walked through the doors, he didn't find a titan of industry. He found a company that was basically "Honey-Hell."
People forget how close the brink actually was. Cote took over a business with a $20 billion market cap that was hemorrhaging credibility. By the time he stepped down in 2017, that number hit $120 billion. That's an 800% return. You don't get those numbers by just "cutting costs" or "synergizing." You get them by being an absolute bulldog about the things most CEOs find boring.
The "One Honeywell" Culture War
Honestly, the biggest hurdle wasn't the balance sheet. It was the hats. In those first few months, managers would actually ask Cote if he was "red" (Honeywell legacy) or "blue" (AlliedSignal legacy). It sounds like a middle school playground, right? But it was killing the company.
Cote didn't play along. He introduced "One Honeywell." It wasn't just a catchy internal slogan; it was a total rejection of the siloed, tribal nonsense that had paralyzed the firm. He forced these warring factions to use the same processes. He moved people around. If you wanted to succeed under Cote, you had to stop caring about which logo was on your paycheck five years ago.
He focused on what he called the "12 Behaviors." Most corporate values are just posters in a breakroom that nobody reads. Cote used these to decide who got promoted and who got fired. He wanted people who were self-aware and focused on the customer, not their own internal kingdom.
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Why the Honeywell Operating System (HOS) Changed Everything
If you want to understand why David M Cote Honeywell's tenure is still studied in business schools, you have to look at the Honeywell Operating System. It was basically Cote’s version of the Toyota Production System, but adapted for a massive, multi-industry conglomerate.
It started with "Bronze" certification for factories and moved up to "Gold." But here’s the kicker: it wasn’t just for the guys on the assembly line. He applied these lean principles to the back office, too. Accounting, HR, legal—everything had to be faster and less wasteful.
I've heard stories about "tier meetings" where shop floor workers had 15 minutes to flag issues. If they couldn't fix it, it went up to the next level. Decisions that used to take months suddenly took hours. It turned a slow-moving dinosaur into a surprisingly agile predator.
Winning Now, Winning Later: The Impossible Balance
Most CEOs live for the next 90 days. They'll gut R&D just to hit a quarterly earnings target and get their bonus. Cote famously hated this. He wrote a whole book about it called Winning Now, Winning Later.
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He had this weirdly simple philosophy: you have to do both. You can't sacrifice the future for the present, and you can't ignore the present while dreaming about the future.
- Short Term: He ruthlessly optimized margins and fixed a massive $2.8 billion pension deficit.
- Long Term: He dumped money into R&D and globalization.
During the 2008 Great Recession, when every other industrial company was laying people off and shuttering projects, Cote took a different path. He used furloughs—unpaid time off—to keep the talent on board. He kept the R&D engines running. When the economy finally woke up in 2010, Honeywell was ready to sprint while its competitors were still trying to re-hire their staff.
The M&A Machine
Cote wasn't afraid to buy things. Or sell them. He oversaw about 80 acquisitions and 50 divestitures. He basically rebuilt the portfolio from the ground up. He moved the company away from low-margin "commodity" stuff and toward high-tech sectors like aerospace, performance materials, and automation.
One of his smartest moves? Turning Honeywell into a software company. People think of Honeywell as making thermostats or jet engines, but Cote realized the real money was in the code that ran those things. He hired thousands of software engineers. He transformed "old iron" into "smart tech."
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What Most People Get Wrong About the Legacy
Some critics point to his massive $78 million retirement account or the way he pushed for "entitlement reform" while his workers' pension funds were underfunded early in his tenure. It's a valid point. Cote was a hard-nosed, GE-trained leader. He wasn't there to be everyone's best friend.
But you can't argue with the results. He took a "train wreck" and turned it into a gold mine. He didn't do it with "magic." He did it with what he calls "intellectual rigor."
He would sit in meetings and ask the most junior person their opinion first. Why? Because he didn't want them to just parrot whatever their boss said. He wanted the truth, even if it was ugly. Honestly, that’s a trait more leaders could use today.
Actionable Insights from the Cote Playbook
If you're trying to turn around a team or a business, here’s how to use the Cote method:
- Kill the Silos Fast: If your team is fighting over "who does what" or "which department is better," you're losing money. Force a unified process immediately.
- The 3-Minute Rule: Cote says if you have five minutes to solve a problem, spend three minutes thinking about how you'll do it. Don't just react. Plan.
- Invest in the Dip: When things get bad, everyone else will cut their long-term bets. If you can find a way to keep your "future" projects alive during a crisis, you'll lap the competition when the sun comes out.
- Measure the Right Things: Don't just track profit. Track the "behaviors" that lead to profit. Are your people actually listening to customers? Are they being honest about failures?
David M. Cote’s run at Honeywell wasn't a fluke. It was the result of a guy who was willing to do the boring, difficult work of fixing a broken culture and a messy portfolio one day at a time. It's not glamorous, but it's how you build a $100 billion legacy.
For a deeper look into the specific operational metrics that drove this growth, you can review his detailed case studies on the Honeywell Operating System or his personal accounts in Winning Now, Winning Later.